TMI Blog2020 (10) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... nafide belief they deposited tax @1% u/s 194IA of the Act considering the seller as Resident Indian and later on before conclusion of the proceedings before the Ld. A.O have deposited correct amount of tax @20.6% and applicable interest. Thus they had a reasonable cause for the said failure and in addition the decision in the case of SMS India Ltd [ 2005 (11) TMI 363 - ITAT MUMBAI] also applies squarely on the case of the assessee. We thus set aside the finding of Ld. CIT(A) and direct the revenue authorities to delete the penalty levied u/s 271C - Decided in favour of assessee. - ITA No.500/Ind/2018 ITA No.501/Ind/2018 ITA No.502/Ind/2018 - - - Dated:- 14-10-2020 - HON BLE KUL BHARAT, JUDICIAL MEMBER AND HON BLE MANISH BORAD, ACCOUNTANT MEMBER Revenue by : Smt. Vinita Dubey, Sr.DR Assessee by : S/Shri Manoj Munishi Pankaj Shah, CAs ORDER PER MANISH BORAD The above captioned appeals filed at the instances of the assessee(s) pertaining to Assessment Year 2015-16 are directed against the orders of Ld. Commissioner of Income Tax (Appeals)-13 (in short Ld.CIT(A) ], Ahmedabad dated 24.04.2018 which are arising out of the order u/s 271C of the Income Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deed dated 24.10.2014 for transaction of purchase of immoveable property valuing at ₹ 75 lakhs. This transaction was carried out through a broker. The name of the seller is Shri Manoj Gangwar. In the sale deed Shri Manoj Gangwar has mentioned his PAN, local address of Farukhabad, U.P and present address of Colorado, USA. All the three joint owners considering the total transaction value being more than ₹ 50 lakhs, (though individually the consideration was ₹ 25 lakhs only) deducted tax at source @1% on the gross sale consideration and deposited it with Government treasury on 15.1.2015. Subsequently on receiving the information from ITO (TDS-II), Indore the Ld. A.O examined the transactions of tax deducted at source. Ld. A.O observed that the seller is a non resident Indian therefore the tax to be deducted at source on the gross purchase consideration should have been 20.6% as provided in Section 195 of the Act. Since the assessee has not deducted tax at the correct rate he considered the assessee in default. However before the conclusion of the proceedings u/s 201(1)/201(1A) of the Act the respective assessee(s) deposited the due tax to be deducted u/s 195 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and reported the same by obtaining TAN and filing TDS return. 5. The Appellant has acted bonafidely since a. PAN of the seller nowhere indicates his residential status b. The seller and buyers met each other for the first time in registrar office only through broker. c. Requirement of Sub Registrar office is to submit TDS certificate as per Section 194IA of Act which was furnished and accepted by Government department who are also not aware about the technical provisions of Section 195 of Act. d. Immediately on becoming aware the Appellant ensured compliance in form of payment of full tax at source on transaction by recovering it from non-resident Indian as per Section 195 of the Act. e. Be that as it may the seller may not be considered as non resident if he has stated a foreign address along with local address as residential status depends on stay as per conditions given in Section 6 of Act which have not been examined by the AO or any other authority. 6. The AO and CIT(A) has relied on some screenshot of mobile stating to be letter of seller received through email which is not known to the Appellant nor is submitted by it to the Department. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into sale agreement. She also submitted that the ignorance of law is no excuse and provisions of Section 271C of the Act are squarely applicable on the facts of the instant case since the assessee has failed to deduct correct tax as required by the provision of Chapter XVII-B. 9. We have heard rival contentions and perused the records placed before us. The sole grievance raised by all the three assessee(s) namely S/Shri Jitendra Sharma, Bharat Sharma and Shartrughan Sharma are against the finding of Ld. CIT(A) confirming the levy of penalty at ₹ 5,15,000/- to each u/s 271C of the Act for low deduction of tax at source. 10. We observe that all three assessee(s) jointly planned to purchase an immoveable property valuing at ₹ 75 lakhs. Consideration of ₹ 25 lakhs each was paid by the buyers. Seller is the single person namely Shri Manish Gangwal. In the sale deed seller s local address is of Uttar Pradesh and the present address is at Colorado, USA. As claimed by the Ld. Counsel for the assessee this transactions was carried out through broker. The copy of PAN card of the seller was given who himself was available at the time of transaction. In the PAN card add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribed forms within the time specified. It is also an admitted fact that in the earlier years the annual salary returns were accepted by the department as such. In the year under consideration the assessee was required to clarify the basis of deduction of tax under section 192 of the Act. It has been stated by the assessee's counsel that at this point only the assessee took professional advice relating to deduction of tax at source and when advised to deduct the tax on impugned payments the assessee paid the short deducted tax and interest thereon voluntarily and filed revised annual salary returns for all four years. The assessing officer levied the penalty mainly on the ground that the deposits of the short deducted tax was made after initiation of the proceedings and therefore, the same was in voluntary and also relied on the principle that ignorance of law was no excuse. From the facts of the case it is observed that the assessee filed return for all years within the time and once the return for first year was accepted as such, the belief on the part of the assessee that he rightly deducted the tax got strengthened and the same practice continued till the assessee was advi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e penalty mainly on the ground that the deposits of the short deducted tax was made after initiation of the proceedings and therefore, the same was in voluntary and also relied on the principle that ignorance of law was no excuse. From the facts of the case it is observed that the assessee filed return for all years within the time and once the return for first year was accepted as such, the belief on the part of the assessee that he rightly deducted the tax got strengthened and the same practice continued till the assessee was advised professionally otherwise and this leads to obvious inference that when the assessee was confronted with this issue for the first time he immediately acted and rectified the same. Therefore, in our considered opinion bona fide belief in short deduction of tax coupled with voluntary compliance in the term of depositing the same immediately on coming to know the same would constitute reasonable cause. The assessing officer also gave a finding that ignorance of law is no excuse but simultaneously it is also true that there is no presumption that everyone knows the law. What is important is the fact that the moment a person comes to know that he has commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposited. Mens rea to evade tax is not appearing at any stage of the proceedings on the part of the assessee. It would have made no difference for them to deduct tax @1% or 20.6% since it was to be withheld from the purchase consideration. There cannot be any other mal intention for deduction of TDS at lower or wrong rate. 17. We therefore are of the considered view that in the given facts and circumstances of the case the assessee(s) are duly eligible to get the benefit of the provisions of Section 273B of the Act as they have proved beyond doubt that in a bonafide belief they deposited tax @1% u/s 194IA of the Act considering the seller as Resident Indian and later on before conclusion of the proceedings before the Ld. A.O have deposited correct amount of tax @20.6% and applicable interest. Thus they had a reasonable cause for the said failure and in addition the decision of Hon'ble Mumbai Tribunal in the case of SMS India Ltd (supra) also applies squarely on the case of the assessee. We thus set aside the finding of Ld. CIT(A) and direct the revenue authorities to delete the penalty of ₹ 5,15,000/- levied u/s 271C of the Act in the case of all the three assessee(s) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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